# Consider a simple economy that produces two goods: pens and erasers. The following table shows the prices and quantities of the goods over a three-year period.YearPensErasersPriceQuantityPriceQuantity(Dollars per pen)(Number of pens)(Dollars per eraser)(Number of erasers)201511151165201621354225201741004175                     From 2016 to 2017, nominal GDP    , and real GDP    . The inflation rate in 2017 was    . Why is real GDP a more accurate measure of an economy's production than nominal GDP?Real GDP does not include the value of intermediate goods and services, but nominal GDP does. Real GDP includes the value of exports, but nominal GDP does not. Real GDP is not influenced by price changes, but nominal GDP is.

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Consider a simple economy that produces two goods: pens and erasers. The following table shows the prices and quantities of the goods over a three-year period.
Year
Pens
Erasers
Price
Quantity
Price
Quantity
(Dollars per pen)
(Number of pens)
(Dollars per eraser)
(Number of erasers)
2015 1 115 1 165
2016 2 135 4 225
2017 4 100 4 175

From 2016 to 2017, nominal GDP    , and real GDP    .

The inflation rate in 2017 was    .

Why is real GDP a more accurate measure of an economy's production than nominal GDP?
Real GDP does not include the value of intermediate goods and services, but nominal GDP does.

Real GDP includes the value of exports, but nominal GDP does not.

Real GDP is not influenced by price changes, but nominal GDP is.

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Step 1

Nominal GDP is the market value of all final goods and services produced by a nation at the current market prices. It does not take inflation in account and can be calculated by adding  revenue generated from all the goods and services produced in an year. Nominal GDP for all the three years is calculated as follows-

Step 2

From 2016 to 2017, the nominal GDP decreased from \$1,170 to \$1,100.

Step 3

Real GDP is market value of all goods and services evaluated at base year prices. Thus it is also called inflation adjusted GD...

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